A New Bank to Save Our Infrastructure

1.

These are rare times of ferment in one of the most neglected fields of public policy—the nation’s infrastructure, or what used to be known as public works, including roads, mass transit, bridges, ports and airports, flood control systems, and much else. We have been confronted with spectacular and tragic evidence of the inadequacy of these facilities in the failure of the levees in New Orleans and in the collapse of the I-35 bridge in Minneapolis. More generally, a recent report by the American Society of Civil Engineers concludes that America’s infrastructure overall is close to “failing” and deserves a grade of “D.” It estimates that an investment of $1.6 trillion will be needed to bring it up to working order.

According to the report, nearly 30 percent of the nation’s 590,750 bridges are “structurally deficient or functionally obsolete” and it will take “$9.4 billion a year for 20 years to eliminate all bridge deficiencies.” “The number of unsafe dams has risen by 33 percent to more than 3,500.” Public transit facilities—including buses, subways, and commuter trains—are dangerously under-funded, even as demand for them has “increased faster than any other mode of transportation.” Current funding for safe drinking water amounts to “less than 10 percent of the total national requirement,” while “aging wastewater management systems discharge billions of gallons of untreated sewage into US surface waters each year.” Yet government investment in these vital facilities is generally held to be below the level needed simply to maintain them in their current poor state.

The gap between our economy’s need for functioning infrastructure and what is being invested in it has aroused much concern. Tired of waiting for Washington to recover the vision and energy it once devoted to the problem, Governor Arnold Schwarzenegger convinced California voters in 2006 to approve $20 billion in bonds to finance the repair and construction of roads and bridges in the state as well as public transit systems and other facilities. Together with Governor Ed Rendell of Pennsylvania and New York Mayor Michael Bloomberg, Governor Schwarzenegger has also formed a bipartisan group called Building America’s Future, which aims to find better ways to address the crisis. A second group, the Transportation Transformation Group, led by, among others, former House majority leader Dick Gephardt and General Barry McCaffrey, former US Southern Forces commander and drug czar, has a similar mission and the backing of Goldman Sachs.

Along with the Australian company Macquarie, Goldman Sachs is also among a new group of investors who are taking part in private refinancings of toll roads such as the Chicago Skyway, the Indiana Toll Road, and now perhaps the Pennsylvania Turnpike and the New Jersey Turnpike. Under those arrangements, the state or city sells the road and the right to set and collect tolls on it to a private company—in essence, a new form of government borrowing.

The last element of this mounting interest in the problem of infrastructure is public frustration at the costs to consumers of poorly maintained…

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